In the international market, the price of oil (Brent) is hovering around $100 per barrel. However, in Pakistan, the price of petrol has been fixed at Rs.149.86 since February 28, 2022. With the PTI government gone, should the motorists expect an increase in petrol pieces anytime soon?
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The read more on the latest petroleum prices in Pakistan: Petrol Price in Pakistan: Petroleum prices slashed by Rs.10
In March 2022, the then finance minister Shaukat Tareen had said that the government was subsidizing to keep the petrol price at Rs.150. He further said that if the government was not spending Rs.104 Billion, the price of petrol in Pakistan would be Rs.240 per litre.
There are a variety of reasons why the previous government chose to first slash and then fix the petroleum prices in Pakistan. Many experts are of the view that domestic political and economic concerns like rising inflation and protesting opposition parties forced the government from further increasing petroleum prices.
Now that these opposition parties are in government, would they follow their predecessor’s policy or increase the prices of petroleum products in Pakistan to reduce the fiscal deficit?
What to expect in the coming days?
The previous government twice backed out of commitments made with the IMF after receiving their money. If the government had remained in power, they’d have faced strong ramifications for the foreign exchange reserves and the exchange rate, further increasing inflation.
The new government in order to avoid derailing the IMF program is likely to take back these subsidies, hence increasing the prices of petroleum products in Pakistan. Furthermore, populist policies may not be followed to:
- Lower debt and current account deficit (CAD)
- Stabilize the Rupee
Will the new government go the whole hog and embrace the IMF?
Don’t forget – the new government is also full of politicians and politicians tend to like populist policies. Having said that, the new lot can’t stay oblivious to rising petroleum prices in the world market and not increase their prices locally. It would make no economic sense. Pakistan simply cannot afford to keep subsidizing petroleum prices forever.
It is worth reminding our readers that the PML N government in its last year (2018), announced massive tax cuts. Coincidently, the person who did that – Miftah Ismail – is expected to be the new finance minister.
The way forward?
Pakistan’s best hope is decreasing international oil prices. And there is some hope. In the Asian markets, the oil prices have decreased consistently for the past two weeks. This is due to some countries announcing to release their strategic stocks of oil and a declining demand for oil due to Covid related lockdown in Shanghai. China remains the biggest importer of oil in the world.
The government is most likely to increase petrol prices in Pakistan. To what extent is not known but it may not be Rs.240 per litre. But it won’t stick around at Rs.149.86 either. So fill up your tank.
Do you expect the new government to increase petrol prices? If yes, by how much?
Petroleum pricing used to be based on international prices as Pakistan is a net importer…no subsidiaries are justified…the government has to sacrifice development funds and pay heavy interest on borrowed money…this creates a circular debt which goes on and on like we are still trapped in circular debt of electricity with IPPs and RLNG ..must increase prices and consumers to use petrol/diesel economically with car pooling/rides sharing etc.